Case 2:05-cv-00810-DDP-RNB Document ... - United States …court.cacd.uscourts.gov/CACD/RecentPubOp.nsf/ecc65f191f28f59b... · UNITED STATES DISTRICT COURT ... beneficiaries of an

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UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

MICHAEL MITCHELL,

Plaintiff,

v.

METROPOLITAN LIFE INSURANCECOMPANY; CB RICHARD ELLISLONG TERM DISABILITY PLAN;UNUM LIFE INSURANCE COMPANYOF AMERICA; CB RICHARD ELLISMEDICAL PLAN; CB RICHARDELLIS LIFE INSURANCE PLAN;CB RICHARD ELLISPENSION/RETIREMENT PLAN,

Defendants.___________________________

))))))))))))))))))

Case No. CV 05-00810 DDP (RNBx)

FINDINGS OF FACT AND CONCLUSIONSOF LAW

Plaintiff Michael Mitchell brings this action under 29 U.S.C.

section 1132(a)(1)(B) seeking long-term disability (“LTD”) benefits

pursuant to a benefit plan provided by his employer, CB Richard

Ellis (“CBRE”). Mitchell claims a disability for several health

problems, including chronic fatigue syndrome, restless legs

syndrome, hemochromatosis, and depression.

From January 1, 2000 until December 1, 2003, the LTD plan was

administered under a group insurance policy by Defendant and

Case 2:05-cv-00810-DDP-RNB Document 81 Filed 12/03/2007 Page 1 of 37

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cross-claimant UNUM Life Insurance Company of America (“UNUM”). As

of January 1, 2004, the LTD plan was administered under a group

insurance policy by Defendant Metropolitan Life Insurance Company

(“MET”).

In April 2004, when MET covered the plan, Mitchell filed with

MET for LTD benefits. In his initial administrative claim with

MET, Mitchell stated that his disability began in October 2003,

when UNUM covered the plan. MET initially denied Mitchell’s claim

because he was “still working.” MET then denied Mitchell’s appeal

based upon a lack of objective evidence that Mitchell was disabled

under the plan. After the appeal, Mitchell instituted this action.

For the first time during the litigation, MET raised the defense

that it was not the responsible claims administrator or insurer

because Mitchell’s alleged disability had started in October 2003

when he was covered under the UNUM policy. MET argued that UNUM

was the responsible administrator and insurer.

Mitchell next filed an administrative claim for LTD benefits

with UNUM. UNUM denied Mitchell’s claim because it found that he

did not suffer from a disability and that the late filing of the

claim prejudiced its evaluation. On appeal, UNUM additionally

found that Mitchell was still working after the date of his claimed

disability, rendering him ineligible for LTD benefits. Mitchell

then added UNUM to this action.

After considering the written submissions and documentary

evidence of the parties, and hearing oral argument, the Court

adopts the following Findings of Fact and Conclusions of Law. The

Court holds that MET abused its discretion in denying Mitchell’s

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1 Unless otherwise noted, all facts come from either the METAdministrative Record (“MET”) or the UNUM Administrative Record(“UNUM”).

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claim, and that MET is the responsible claims administrator and

insurer for Mitchell’s disability.

FINDINGS OF FACT1

I. The Parties

1. Plaintiff Michael Mitchell has been an employee of CB

Richard Ellis (“CBRE”) since 1983. He is currently a

vice president of sales.

2. CBRE, Mitchell’s employer, is a company that specializes

in real estate services.

3. Defendant Metropolitan Life Insurance Company (“MET”)

issues insurance policies, including disability insurance

coverage for employee benefit plans.

4. Defendant and cross-claimant UNUM Life Insurance Company

of America (“UNUM”) issues insurance policies, including

disability insurance coverage for employee benefit plans.

UNUM is a subsidiary of UNUMProvident Corporation.

II. The UNUM Disability Insurance Policy

5. Effective January 1, 2000, UNUM issued its insurance

policy (“UNUM Policy”) to CBRE, providing LTD benefits

for eligible employees. (UNUM 34.) UNUM was the insurer

and claims administrator for the policy.

6. The relevant portion of the UNUM Policy on coverage

provides:


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2 Under the UNUM policy, elimination period is “a period ofcontinuous disability which must be satisfied before you areeligible to receive benefits from UNUM.” (UNUM 66.)

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WHEN DOES YOUR COVERAGE END? Your coverage under the policy

or a plan ends on the earliest of: the date the policy or plan

is cancelled . . .

UNUM will provide coverage for a payable claim which occurs

while you are covered under the policy or plan. (UNUM 45.)

7. The UNUM POLICY defines “disability” as follows:

[Y]ou are limited from performing the material and substantial

duties of your regular occupation due to your sickness or

injury; and

[Y]ou have a 20% or more loss in your indexed monthly earnings

due to the same sickness or injury; and

[D]uring the elimination period,2 you are unable to perform

any of the material and substantial duties of your regular

occupation.

After 24 months of payments you are disabled when UNUM

determines that due to the same sickness or injury, you are

unable to perform the duties of any gainful occupation for

which you are reasonably fitted by education, training or

experience. (UNUM 47) (emphasis omitted).

8. To be eligible for LTD benefits, the UNUM Policy requires

that a beneficiary be “continuously disabled through

[the] elimination period.” The elimination period is 90

days. (UNUM 47).

9. The UNUM Policy requests written notice of a claim within

30 days of the starting date of disability and requires


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3 The master plan sets forth the terms and conditions of aninsurance policy. ERISA requires that participants andbeneficiaries of an employee benefit plan receive a summary plandescription that is "written in a manner calculated to beunderstood by the average plan participant, and shall besufficiently accurate and comprehensive to reasonably apprise suchparticipants and beneficiaries of their rights and obligationsunder the plan." 29 U.S.C. § 1022(a); Pisciotta v. Teledyne Indus.,91 F.3d 1326, 1329 (9th Cir. 1996) ("The SPD [summary plandescription] is the statutorily established means of informingparticipants of the terms of the plan and its benefits.") (citationomitted). The Ninth Circuit recognizes a summary plan descriptionas part of an ERISA plan. Bergt v. Ret. Plan for Pilots Employed byMarkAir, Inc., 293 F.3d 1139, 1143 (9th Cir. 2002).

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written notice within 90 days of a claimant’s elimination

period. UNUM allows written notice for up to a year

after the elimination period when it not possible to meet

the 90-day requirement. (UNUM 38.).

10. Under the Policy, UNUM was the claims administrator. The

Policy provides: “When making a benefit determination

under the policy UNUM has discretionary authority to

determine eligibility for benefits and to interpret the

terms and provisions of the policy.” (UNUM 43.)

III. The MET Disability Insurance Policy

11. On January 1, 2004, MET replaced UNUM as the

administrator and insurer of the CBRE plan. MET issued a

new insurance policy (“MET Policy”) to cover the CBRE LTD

benefits plan.

12. The Met Policy is comprised of a master plan document and

a summary plan description.3

13. The MET Policy’s master plan has a section entitled

“Special Rules For Groups Previously Insured Under A Plan

Of Disability Income Insurance.” The stated purpose of

the rules are “[t]o prevent a loss of insurance because


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of a change in insurance carriers.” (MET 27.) The

“Special Rules” section contains “Rules for When

Insurance Takes Effect if You were insured Under the

Prior Plan on the Day Before the Replacement Date.” It

provides in relevant part:

If You are Actively at Work on the day before the Replacement

Date, You will become insured for Disability Income Insurance

under this certificate on the Replacement Date.

If You are not Actively at Work on the day before the

Replacement Date, You will become insured for Disability

Income Insurance under this certificate on the date You return

to Active Work. (MET 27.)

14. The MET master plan defines “Actively at Work” or “Active

Work” to mean “You are performing all of the usual and

customary duties of Your job on a Full-Time basis.” (MET

20). The MET summary plan defines “Actively at Work” or

“Active Work” to mean “Being on the job as required of an

employee or Independent Contractor of CBRE.” (MET 220.)

15. The “Special Rules” section also contains “Rules for Pre-

existing Conditions” that provides:

In determining whether a Disability is due to a Pre-existing

Condition, We will credit You for any time You were insured

under the Prior Plan. If Your Disability is due to a Pre-

existing Condition as described in this certificate, but would

not have been due to a pre-existing condition under the Prior

Plan, We will pay a benefit equal to the lesser of: the

benefit amount under this certificate; or the disability


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income insurance benefit that would have been payable to you

under the Prior Plan. (MET 27.)

16. The MET Policy’s master plan defines “Disabled or

Disability” as meaning that “[d]ue to Sickness or as a

direct result of accidental injury:

You are receiving appropriate care and treatment and complying

with the requirements of such treatment; and

You are unable to earn:

during the elimination period and the next 24 months of

sickness or accidental injury, unable to earn more than 80% of

your pre-disability earnings at your own occupation for any

employer in the local economy; and

After such period, unable to earn more than 80% of your pre-

disability earnings at your own occupation for any employer in

your local economy at any gainful occupation for which you are

reasonably qualified taking into account your training,

education, and experience.” (MET 20.)

17. The MET Policy defines “disability” at two locations in

the summary plan. First, under the “Plan Benefits”

section, it states:

You will be considered disabled under the LTD Plan when

MetLife determines that you are unable to perform your regular

job functions due to sickness, or as a direct result of

accidental injury, the employee is receiving appropriate care

and treatment and complying with the requirements of such

treatment and is:

During the elimination period and the next 24 months of



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their pre-disability earnings at own occupation for any

employer in the local economy;

After such period, unable to earn more than 80% of their pre-

disability earnings at own occupation for any employer in the

local economy at any gainful occupation for which they are

reasonably qualified taking into account their training, prior

education, or experience. (MET 257.)

Second, under the “Definitions” section, “disability” is

defined as “a condition in which a person is unable to

perform the material and substantial duties of his/her

regular occupation due to illness or injury. Or, after

24 months of receiving [LTD] payments, a condition in

which a person is unable, due to the same illness or

injury, to perform the duties of any gainful occupation

for which he or she is reasonably fitted by education,

training or experience.” (MET 270.)

18. The MET Policy’s summary plan identifies MET as the claim

administrator for LTD benefits. The Policy states that

MET has “exclusive, complete, and final discretionary

authority to interpret and apply Plan provisions and to

determine related facts with regard to:

Determining a participant’s eligibility to receive benefits

Processing claims

Paying benefits

Making determinations on appeals of claim denials.”

(MET 268.)

///

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4 Hemochromatosis is a disorder where iron-containing pigmentscollect in a person’s tissues, resulting in joint or abdominalpain, weakness, and fatigue.

5 RLS is a neurological condition that causes a person to needto move their legs frequently.

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IV. Mitchell’s History of Illness

19. Michael Mitchell claims to suffer from several health

problems, including but not limited to chronic fatigue

syndrome (“CFS”), hemochromatosis,4 restless leg syndrome

(“RLS”),5 knee osteoarthritis, sleep apnea, and

depression.

20. In 2001, Mitchell suffered increasingly worse health

problems. In February 2001, he was diagnosed with RLS.

(MET 134.) In March 2001, Mitchell had a Fibromyalgia

Initial Evaluation conducted by Dr. Silverman, the

director of Cedars-Sinai Medical Center’s fibromyalgia

program. Dr. Silverman did not find fibromyalgia, but

did note a history of chronic fatigue. At that time, Dr.

Silverman found no significant limitation in daily

activities. (MET 112, 114.)

21. In September and October 2003, Mitchell went to the Mayo

Clinic Sleep Disorder Center. The Mayo Clinic

specialists diagnosed Mitchell with CFS, probable major

depression, RLS, and mild sleep apnea. The Mayo Clinic’s

report stated that “[t]he predominant problem is that of

long-standing chronic fatigue syndrome. . . .” The Mayo

Clinic report recommended that Mitchell undergo a

multimodal treatment program for chronic fatigue. (MET

177-182.) Throughout the remainder of 2003 and 2004,


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Mitchell underwent treatment, visiting at least twenty

doctors and specialists during that time, and taking

several medications. (MET 96, 129-131, 174-176.)

22. From December 2003, Mitchell began seeing Dr. Uy, an

Assistant Professor of Psychiatry with the USC Department

of Psychiatry. In a September 2004 letter to a MET case

manager, Dr. Uy described Mitchell’s depression, and the

contribution of his other physical ailments to worsening

symptoms of depression. Dr. Uy concluded that Mitchell’s

symptoms had not improved for nearly a year and that he

would probably be “unable to perform adequately at work

for at least a year.” (MET 96-97.)

23. In February 2004, Mitchell went to Dr. Petzinger of the

USC Neurology department. Mitchell’s MRI was found to be

“essentially unremarkable.” Dr. Metzinger commented that

Mitchell’s behavior “seemed a little bit off.” (MET

131.) A subsequent neurophysiological evaluation of

Mitchell performed by Dr. McCleary of USC Neurology

“failed to highlight any impaired cognitive domains.”

Dr. McCleary noted that Mitchell was “experiencing a

remarkably high level of emotional distress” that may be

linked to his physical symptoms. (MET 134-139.) After

this exam in June 2004, Dr. Petzinger reevaluated

Mitchell, finding no improvement in his symptoms. (MET

125-26.)

24. In August 2004, Mitchell again saw Dr. Silverman, who had

become a UCLA Professor of Medicine. Dr. Silverman

confirmed the diagnosis that Mitchell had CFS, major


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depression, RLS, hemochromatosis, and osteoarthritis of

the knees. In discussing Mitchell’s CFS, Dr. Silverman

stated that Mitchell was “unfortunately at this point

disabled in that he cannot initiate new work or clients.”

Dr. Silverman recommended a pain program, including

aquatic exercise. He also noted Mitchell’s inability to

tolerate most antidepressant medications. (MET 116-121.)

25. During this time, Mitchell also visited Dr. Ehresmann, a

USC medical school rhematologist. A November 2004 letter

from Dr. Ehresmann summarizes Mitchell’s history of

illness. Dr. Ehresmann states that "patient’s work

capacity is impaired due to these medical factors." (MET

91-93.)

26. Mitchell claims that these health problems were

detrimental to his work performance. As Mitchell’s

compensation was commission-based, he suffered lost

earnings. His earnings for the relevant period were as

follows: (1) 2001 - $163,000; (2) 2002 - $239,000; (3)

2003 - $19,000; (4) 2004 - $17,000; (5) 2005 - $48,000;

(6) 2006 - $114,000; (7) 2007 - $100,000 (through April

2007). (Bernacchi Declaration ¶ 3, Ex. 1.)

V. Mitchell’s Claims for LTD Benefits

A. Mitchell’s Claim Under the MET Policy

27. In March 2004, three months after the MET Policy took

effect, Mitchell contacted MET about filing a LTD

benefits claim. In a March 17 letter, Mitchell explained

that he was working Monday to Friday, 9 AM to 5 PM, but

that his conditions, listed in the letter, had


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“deteriorated to the point that I cannot do my job

effectively.” (MET 244.) In a March 23 phone call with

MET personnel regarding LTD benefits, Mitchell explained

that he did not plan to stop coming to work. He was

informed that a continuous absence was required to

qualify for LTD benefits. (MET 59.)

28. On April 15, 2004, Mitchell filed a claim with MET,

arguing that his health conditions established a

disability. On the claim form, Mitchell wrote that he

was still working. Further, he stated that the

disability began in October 2003, three months before the

MET Policy began. Mitchell attached a statement

regarding his conditions, an attending physician

statement by Dr. Wollaston, and the Mayo Clinic Report.

29. Dr. Wollaston’s statement indicated that Mitchell had

hemochromatosis and osteoarthritis of the knee. He rated

Mitchell as having a Class 3 psychological limitation,

meaning Mitchell could handle only limited stress

situations. He noted that stress could exacerbate

Mitchell’s fatigue and pain. Further, he advised that

Mitchell only work part-time and recommended job

modification. (MET 119-121.)

30. On April 23, 2004, MET denied Mitchell’s claim. In its

denial letter, MET provided the definition of disability

from its master plan. (MET 167; see also MET 20.) MET

determined that Mitchell did not meet its definition of

disability, reasoning that Dr. Wollaston’s statement did

not note any work restrictions and Mitchell was in fact


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still working. MET found that Mitchell was not disabled

because he was capable of performing his own occupation,

which was a sedentary position. (MET 167.)

31. On May 13, 2004, CBRE’s Human Resources department sent

to Mitchell by fax a copy of “the UNUM claim form that

needs to be used instead of MetLife since this began

prior to January 1, 2004.” (UNUM 695.) The Court

concludes that “this” refers to Mitchell’s complaints of

a disabling condition. The Court notes that the MET

administrative record does not contain this fax.

32. After the denial, Mitchell called MET for an explanation

of the denial. He was told that a person is disabled

only if unable to function at less than a sedentary level

of occupation due to their condition. (MET 61.)

Mitchell then engaged in a series of correspondence with

Teresa Barthlow, the MET senior LTD case management

specialist who was the signatory to Mitchell’s denial

letter. (MET 159-168.) Mitchell was attempting to obtain

clarification of the definition of disability under the

MET Policy. Mitchell’s first letter to Barthlow sought

clarification of the meaning of disability in relation to

his condition. Barthlow’s response explained the MET

appeal procedures. When Mitchell sent a second letter

stating that his questions from the first letter were

“unanswered,” Barthlow responded as follows: “Although I

do wish to be as helpful as possible with respect to your

questions of the claim denial and/or appeal procedures I

will not become engaged in a deliberation with you of the


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Policy’s definition of “Disabled or Disability. I

apologize for any lack of communication or

miscommunication you may feel towards my ability to

answer your questions.” (MET 159.)

33. On June 27, 2004, Mitchell informed MET by telephone that

he intended to appeal the decision. The phone record

indicates Mitchell stated that “he could perform the job

since it was sedentary, but he could not earn as much

because of chronic fatigue.” (MET 61.)

34. In December 2004, now represented by counsel, Mitchell

appealed the decision and included additional

documentation of his medical conditions. Mitchell’s

counsel sent a letter to MET requesting that they

exercise their contractual right to conduct an

independent medical examination of Mitchell to determine

his eligibility for LTD benefits. MET never conducted an

independent medical examination. (MET 44.)

35. MET had Dr. Schmidt, one of its physician consultants,

review Mitchell’s case and prepare a report. In

connection with his appeal, Mitchell included the medical

reports and letters from specialists that the Court has

recounted under the section “Mitchell’s History of

Illness” above. (MET 81-147.) Mitchell provided letters

from co-workers that noted the impact of his health

problems on his work. (MET 148.) He also included a

personal medical diary that tracked his conditions. (MET

186-226.) Dr. Schmidt reviewed these materials. At the

time that she reviewed Mitchell’s case, Dr. Schmidt


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generally worked as a physician consultant for MET three

days a week. (Deposition of Dr. Schmidt 13:6-8; 14:13-

18.)

36. Dr. Schmidt concluded that the “[f]ile lacks sufficient

medical [sic] to support objective evidence of a physical

functional capacity impairment to a full-time sedentary

position.” (MET 77.) On several occasions in the

report, Dr. Schmidt notes that the file lacks particular

information: the lack of x-rays or MRI scans of his knees

or neck, or other notes on his orthopedic problems; lack

of lower extremity or vascular studies to substantiate

leg pain; lack of doctor recommendations that CFS

indicated ADL impairments or the need for a home health

aide; lack of actual reports of sleep studies. However,

Dr. Schmidt notes in her report that many of these

records, x-rays, and studies were available, when she

specifically refers to Mitchell’s treating physicians’

comments on those items. As to the diagnosis of

Mitchell’s depression, Schmidt stated that “I am not

qualified to comment.” (MET 77-78.)

37. Relying primarily on Dr. Schmidt’s report, MET denied

Mitchell’s appeal. (MET 70-72.) In finding that

Mitchell did not suffer from a disability, the appeal

denial states: “The file contained no actual sleep study

results or objective evidence of a functional impairment

that would have prevented Mr. Mitchell from performing

his own occupational job duties. The occupation of Vice

President of Sales is sedentary. The definition of


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disability indicates that you must be able to perform

your own occupation.” (MET 71-72.)

38. Thereafter, Mitchell proceeded to bring this ERISA action

seeking to recover LTD benefits. Nearly one year into

the litigation, MET for the first time raised the defense

that Mitchell did not have coverage under the MET Policy

in October 2003, the time that Mitchell asserted on his

claim form as the start date of disability. Because

Mitchell alleged a disability beginning before MET’s

coverage, MET argues that UNUM would be the administrator

and insurer for Mitchell’s claim. MET, therefore, argues

that Mitchell’s claim should have been filed with UNUM.

Although Mitchell disputed MET’s contention, the parties

agreed to stay proceedings pending UNUM’s administrative

review of Mitchell’s claim.

B. Mitchell’s Claim Under the UNUM Policy

39. On October 3, 2005, Mitchell submitted his claim with

UNUM. UNUM contacted Mitchell’s counsel to explain the

claim process and to obtain information, including a list

of Mitchell’s physicians. (UNUM 82-87; 228-230.) UNUM

also contacted CBRE to obtain predisability earnings

information, hours worked, and a job description. An e-

mail response from CBRE personnel explained that

“[Mitchell] is still working, as far as we know, but

limited hours.” (UNUM 89; 297.) A disability

questionairre from Mitchell to UNUM explained that his

typical work day involved arrival at or around 10:00


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a.m., a lunch hour at noon, a nap in the afternoon, and

leaving around 4:00 or 5:00 p.m. (UNUM 313-314.)

40. In June 2006, UNUM consultant Leor Ownby, R.N., conducted

a nurse review of Mitchell’s case. The nurse review

provided a summary of Mitchell’s conditions. Ownby

concluded that the documentation did not support finding

a disability in October 2003 that prevented Mitchell from

working. Ownby stressed that Mitchell was “working” in

October 2003 and thereafter. (UNUM 614-15.)

41. Around the same time, CBRE responded to UNUM’s request

for information regarding Mitchell’s employment.

Managing Director John Hollingsworth stated that his

notes indicated Mitchell began “feeling the effects of

his illness back in March 2004.” He also stated that

Mitchell was not a part-time employee, but rather, that

his “illness limited him to half the working energy of

other sales agents.” (UNUM 636.)

42. In July 2006, UNUM’s Debra Kile, M.D. conducted a

physician review. Kile indicated a “lack of consensus

regarding diagnoses and etiology of symptoms and

functional consequences,” but found that Mitchell’s “loss

of earnings [was] evident in 2003.” She recommended that

UNUM seek additional information. (UNUM 866-872.)

43. Mitchell provided additional information. On October 3,

2006, Ownby again reviewed Mitchell’s case. Ownby

concluded that the records “demonstrated the claimant is

somatically preoccupied with his subjective complaints of

fatigue.” She also stated that the records “did not


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delineate clearly a period where claimant is totally

impaired to perform his regular job.” (UNUM 1688.) On

October 10, 2006, Dr. Kile again reviewed Mitchell’s

case. Dr. Kile found a lack of consensus and lack of

sufficient evidence to establish a disability.

Specifically, she noted that the many diagnoses of

fatigue did not support a lack of capacity to work;

records showed only mild sleep apnea; x-ray findings

indicated moderate osteoarthritis; and records did not

support significant mental impairment. She also

determined that Mitchell “has reportedly physically

continued to go to work further supporting physical

ability for at least sedentary activities.” (UNUM 1699.)

Both Ownby and Kile stated that review of the claim was

prejudiced by its late filing. (UNUM 1688, 1700.)

44. UNUM also had a psychiatrist, Dr. Kevin Hayes, review

Mitchell’s case. He found that the records did not show

a severe psychiatric condition. He noted that Mitchell’s

initial claim with MET did not list mental condition as a

basis for the disability claim. Finally, he also noted

prejudice due to late filing. (UNUM 1702-04.)

45. UNUM denied Mitchell’s claim, finding insufficient

information to support a disability and prejudice due to

late filing. (UNUM 1730-36.) Mitchell appealed the

decision. UNUM again conducted a nurse and physician

review. Susan K. Pendleton, R.N. affirmed that records

did not support restrictions or limitations from October

2003 and that the review was prejudiced. (UNUM 1791-92.)


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Dr. Beth Schnars, M.D. conducted an extensive analysis of

the records. (UNUM 1823-31.) She concluded that

Mitchell should be found to have a “[w]ork impairment

from [date of disability] (after clarification of total

work cessation) to 6/11/04 at which time full evaluation

for significant organic pathology was excluded.” (UNUM

1830.) She recommended restricting Mitchell’s work to

sedentary activity. She also found the records were

sufficient such that review did not suffer from prejudice

of late filing. (UNUM 1830.)

46. UNUM conducted another psychiatric review. Dr. Malcolm

Spica, P.H.D., determined that Mitchell did not have

limitations from a psychiatric perspective. UNUM also

had a vocational consultant conduct a vocational review

to consider whether Mitchell’s position was consistent

with the restrictions outlined by Dr. Schnars. The

consultant concluded that Mitchell’s position was

sedentary and thus complied with the restrictions.

47. On January 3, 2007, UNUM affirmed denial of Mitchell’s

claim on appeal. The letter denying the appeal cited the

policy definition of disability. It noted that CBRE

informed UNUM that Mitchell never stopped working and was

claiming a disability based on reduced ability to earn.

Thus, UNUM concluded that did not meet the definition of

disability because he “continued to perform a portion of

his material and substantial duties” through January 1,

2004, which was the day after termination of the UNUM

policy. (UNUM 1856-59.)


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6 MET and UNUM do not argue that they are not proper partiesunder 29 U.S.C. § 1132(a)(1)(B). See Everhart v. Allmerica Fin.Life Ins. Co., 275 F.3d 751, 754 (9th Cir. 2001).

7 See Findings of Fact, Parts II and III, supra.

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CONCLUSIONS OF LAW

I. Standard of Review

1. ERISA provides for judicial review of a decision to deny

benefits to an ERISA plan beneficiary. See 29 U.S.C. §§

1132(a)(1)(B); 1132(e).6

2. ERISA benefits determinations are to be reviewed de novo,

"unless the benefit plan gives the administrator or

fiduciary discretionary authority to determine

eligibility for benefits or to construe the terms of the

plan." Firestone Tire & Rubber Co. v. Bruch, 489 U.S.

101, 115 (1989). An ERISA benefits determination under a

plan that “unambiguously” confers such discretionary

authority shall be reviewed under an abuse of discretion

standard. Kearney v. Standard Ins. Co., 175 F.3d 1084,

1090 (9th Cir. 1999). In this case, both the MET Policy

and UNUM Policy unambiguously confer discretion to

determine eligibility for benefits and interpret plan

terms.7 Therefore, the Court reviews the MET and UNUM

denials of benefits under an abuse of discretion

standard.

II. Mitchell’s Claim With MET

A. MET’s Conflict of Interest

3. In Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955,

967-69 (9th Cir. 2006), the Ninth Circuit held that


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district courts should employ a case-by-case approach to

abuse of discretion review in ERISA cases. Id. This

approach allows district courts to consider the “kind of

inherent conflict that exists when a plan administrator

both administers the plan and funds it, as well as other

forms of conflict.” Id. at 967.

4. The Ninth Circuit has offered guidance on tailoring

review to the particular facts and circumstances of a

ERISA administrator’s denial of benefits:

The level of skepticism with which a court views a conflicted

administrator’s decision may be low if a structural conflict

of interest is unaccompanied, for example, by any evidence of

malice, of self-dealing, or of a parsimonious claims-granting

history. A court may weigh a conflict more heavily if, for

example, the administrator provides inconsistent reasons for

denial, fails adequately to investigate a claim or ask

plaintiff for necessary evidence, fails to credit claimant’s

reliable evidence, or has repeatedly denied benefits to

deserving participants by interpreting plan terms incorrectly

or by making decisions against the weight of evidence in the

record.

Id. at 968 (citations omitted).

5. Ultimately, the "district court, when faced with all the

facts and circumstances, must decide in each case how

much or how little to credit the [] administrator’s

reason for denying insurance coverage.” Id. As the

claims administrator and insurer, MET had an “inherent

conflict of interest." Id.; see also Lang v. Long-Term


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8 In addition, Mitchell argues that MET offered inconsistentreasons for denial of his claim, which would be another factor tobe weighed in abuse of discretion analysis. See Lang, 125 F.3d at798-99. In the initial denial, MET found that Mitchell was stillworking and that he was able to perform a sedentary position. Onappeal, MET found that insufficient objective evidence of adisability preventing Mitchell from performance of a sedentaryposition. Although the Court does not find these reasons patentlyinconsistent, the Court does weigh the fact that MET has applied anobjective evidence requirement that does not appear in the policy. See infra Conclusions of Law, Part II.C.2. This is not so muchinconsistent as a procedural irregularity. See Abatie, 458 F.3d at972-74. Further, that MET raises new arguments during litigationis a separate issue that the Court will address below.

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Disability Plan of Sponsor Applied Remote Technology,

Inc., 125 F.3d 794, 797 (9th Cir. 1997). Based on the

facts and circumstances of MET’s administrative review,

the Court finds that MET’s reasons for denying Mitchell’s

claim should be reviewed with skepticism. As will be

discussed further below, the Court finds that MET applied

the wrong definition of disability, see Tremain v. Bell

Industries, Inc., 196 F.3d 970, 977 (9th Cir. 1999),

failed to credit Plaintiff’s substantial evidence of

serious medical conditions, see Black & Decker Disability

Plan v. Nord, 538 U.S. 822, 830 (2003), and failed to

adequately investigate the claim or request available

evidence when the lack of that evidence in the file was

part of the reason for denial, see Booton v. Lockheed

Medical Benefit Plan, 110 F.3d 1461, 1463 (9th Cir.

1997).8 Where MET has engaged in several practices

indicative of a significant conflict of interest, this


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9 While a court may consider extrinsic evidence to determinethe proper level of judicial scrutiny when an administrator has aconflict of interest, Abatie, 458 F.3d at 970, MET has not offeredextrinsic evidence to rebut the presence of factors that indicate asignificant conflict of interest.

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warrants heightened abuse of discretion review. See

Abatie, 458 F.3d at 968.9

B. MET’s Conflicting Plan Definitions of Disability

6. Federal common law principles of contract interpretation

guide the interpretation of ERISA plan terms. Richardson

v. Pension Plan of Bethlehem Steel Corp., 112 F.3d 982,

985 (9th Cir. 1997). The terms of the plan should be

interpreted “in an ordinary and popular sense as would a

[person] of average intelligence and experience.” Id.

(internal quotation omitted). When parties dispute the

meaning of plan terms, a court should “first look to the

explicit language of the agreement to determine, if

possible, the clear intent of the parties.” Id.

7. In the Findings of Fact, the Court noted that MET’s

master plan and summary plan description had conflicting

definitions of disability. The master plan provides that

a person is disabled if “[d]ue to Sickness or as a direct

result of accidental injury:

You are receiving appropriate care and treatment and complying

with the requirements of such treatment; and

You are unable to earn:

during the elimination period and the next 24 months of



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10 Elsewhere in the summary plan description, MET defines“disability” as “a condition in which a person is unable to performthe material and substantial duties of his/her regular occupationdue to illness or injury.”

11 As noted earlier, both the master plan document and summary plan description are part of the plan. Bergt, 293 F.3d at1143.

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your pre-disability earnings at your own occupation for any

employer in the local economy.”

The summary plan description contains a more restrictive

definition of disability. In addition to the terms from

the master plan, the summary plan description also

requires that a person be “unable to perform his/her

regular job functions due to sickness or as a direct

result of injury.”10 Here, Mitchell claims he was

disabled under the master plan definition. MET counters

that Mitchell was not disabled under the summary plan

definition.

8. The Court finds that the master plan definition of

disability unambiguously did not contain a regular job

functions requirement, whereas the summary plan

unambiguously did. When a master plan document and

summary plan description contain conflicting provisions,

the Ninth Circuit has held that the provision more

favorable to the employee is controlling. Bergt, 293

F.3d at 1145.11 The Ninth Circuit has provided the

following rationale for this principle:

Any burden of uncertainty created by careless or inaccurate

drafting of the summary must be placed on those who do the

drafting, and who are most able to bear that burden, and not


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12 At oral argument, MET initially asserted that the summaryplan is controlling because it is the document that explains theplan to employees. When the Court inquired whether MET maintainsthis position for a summary plan materially inconsistent with themaster plan, MET then asserted that the master plan and summaryplan are not inconsistent. However, MET did not explain itsassertion nor identify any ambiguity in the master plan’s terms. The Court’s finding is supported by MET’s failure to explain abasis for viewing the master plan and summary plan definitions asconsistent policy terms.

13 The Court further notes that application of the master plandefinition is appropriate since MET quoted the definition ofdisability from its master plan in full when it denied Mitchell’sadministrative claim and appeal. Although MET’s trial briefs nowcite to the more restrictive language from the summary plandescription, the Court finds the master plan definition iscontrolling. Ninth Circuit authority and MET’s own conduct supportuse of the master plan definition.

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on the individual employee, who is powerless to affect the

drafting of the summary or the policy and ill equipped to bear

the financial hardship that might result from a misleading or

confusing document. Accuracy is not a lot to ask.

Id., quoting Hansen v. Continental Ins. Co., 940 F.2d

971, 982 (5th Cir. 1991). Given the conflicting

provisions in MET’s master plan and summary plan,12 the

Court reviews MET’s decision under the master plan’s

definition of disability, which is more favorable to

Mitchell. See Bergt, 293 F.3d at 1145.13

C. MET’s Denial of Mitchell’s Claim

1. Mitchell’s Initial Claim

9. Although MET cited to the master plan definition in

denying Mitchell’s claim, (MET 167), MET simply failed to

apply it to Mitchell’s case. The master plan definition

required only that due to sickness Mitchell 1) was

receiving appropriate treatment and 2) was unable to earn


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80% of his predisability earnings during the elimination

period and the next 24 months. Mitchell provided

evidence that he earned less than 80% of his

predisability earnings and that he was receiving regular

treatment for his conditions. However, MET’s denial

letter does not discuss these elements at all. Rather,

MET determined that Mitchell was still working and

capable of performing his sedentary position.

10. Due to the conflicting definitions of disability, MET had

to apply the more favorable terms of the master plan.

See Bergt, 293 F.3d at 1145 (recognizing that poor

drafting, which results in conflicting terms, must be

resolved against an ERISA defendant as drafter of the

policy); see also Banuelos v. Constr. Laborers' Trust

Funds for So. Cal., 382 F.3d 897, 904 (9th Cir. 2004)

("Courts will generally bind ERISA defendants to the more

employee-favorable of two conflicting documents-even if

one is erroneous."). Instead, MET disregarded that the

master plan definition of disability unambiguously did

not contain a requirement that a person be able to

perform regular functions. MET in fact applied the more

stringent summary plan definition of disability by

inquiring into Mitchell’s ability to perform regular job

functions, notwithstanding its citation to the master

plan definition. Accordingly, MET applied the wrong

definition of disability. See Tremain, 196 F.3d at 977

(finding the application of the wrong definition of

disability was an abuse of discretion). Mitchell’s


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interpretation that he could still work and be disabled

was reasonable in light of the conflicting provisions.

The Court concludes that MET’s denial, based upon

application of the incorrect definition of disability,

was an abuse of discretion.

11. Inconsistency between master plan and summary plan

documents is a recurrent problem in ERISA cases. Summary

plans, which are supposed to explain employer benefit

plans to employees in succinct, clear language, routinely

serve to obfuscate the meaning of plan terms by having

terms that conflict with the master plan. The resulting

confusion constitutes a disservice to the parties

involved. Many employers bargain for particular policy

provisions in benefit plans that they offer to employees,

only to have inconsistencies blur those policy terms,

often being interpreted by administrators in an ad hoc

manner that restricts entitlement to benefits. When

faced with two conflicting documents, employees cannot

consult either for guidance, and are similarly subject to

the risk that inconsistent terms will be exploited to

impose greater restrictions on benefits. Steadfast

adherence to a rule that resolves inconsistencies against

the drafter will encourage the drafting of consistent

plan documents that will better serve employers and

employees alike, and avoid courts and lawyers having to

needlessly determine the effect of conflicts in terms

that arise from unnecessary drafting errors.


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14 The Court incorporates its conclusions with respect to theinitial claim for MET’s denial on appeal, where it also effectivelyapplied an incorrect definition of disability. Nevertheless, theCourt considers the denial on appeal and the report of MET’sphysician consultant, Dr. Schmidt. The Court notes that the masterplan definition would have allowed MET to deny benefits ifMitchell’s inability to earn was not “due to sickness.” However,MET never considered Mitchell’s claim in this regard.

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2. Mitchell’s Appeal and Dr. Schmidt’s Report14

12. MET’s denial on appeal was based primarily on Dr.

Schmidt’s report, which found no disability based upon a

lack of objective evidence. Before even considering the

report, the Court finds that MET could not deny

Mitchell’s claim based upon this objective evidence

requirement. Nowhere in the plan terms is there an

objective evidence requirement, nor does MET explain the

basis for this requirement. MET cannot deny a claim

based upon a lack of objective evidence unless that

standard was made “clear, plain and conspicuous enough

[in the Policy] to negate layman [Mitchell’s] objectively

reasonable expectations of coverage.” Saltarelli v. Bob

Baker Group Med. Trust et al., 35 F.3d 382, 387 (9th Cir.

1994). The first mention of an objective evidence

requirement in the administrative record was in MET’s

denial of Mitchell’s appeal. MET cannot deny Mitchell’s

claims based on new standards not within its Policy. See

Canseco v. Constr. Laborers Pension Trust for So. Cal.,

93 F.3d 600, 608 (9th Cir. 1996) (holding that

administrators “may not construe a plan so as to impose

an additional requirement for eligibility that clashes

with the terms of the plan”).


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13. MET’s reliance on objective evidence is problematic for

medical conditions like Mitchell’s that may not be

amenable to objective verification. In cases involving

chronic fatigue syndrome, the Ninth Circuit has held that

subjective evidence is important because “CFS does not

have a generally accepted ‘dipstick’ test.” Friedrich v.

Intel Corp., 181 F.3d 1105, 1112 (9th Cir. 1999); see

also Rose v. Shalala, 34 F.3d 13, 18 (1st Cir. 1994)

(recognizing that a “lack of objective proof is what one

may expect in cases of CFS”). MET’s application of an

objective evidence requirement is inconsistent with

medical opinion and case law that identifies the

importance of subjective factors in diagnosis and

treatment of conditions like CFS.

14. Additionally, MET applied this objective evidence

requirement without informing Mitchell of the kind of

evidence that could satisfy it. When Mitchell’s appeal

was denied, MET did not provide an explanation of

objective evidence. The Court finds that MET failed to

comply with 29 C.F.R. 2560.503(g)(iii) which requires “a

description of any additional material or information

necessary for the claimant to perfect the claim and an

explanation of why such material or information is

necessary.” The Ninth Circuit has described this

regulation as encouraging “meaningful dialogue between

ERISA plan administrator and their beneficiaries.”

Booton, 110 F.3d at 1463. Instead, MET opted to find a

lack of objective evidence without explanation how


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15 The Court notes Plaintiff’s arguments that Dr. Schmidt wasunqualified and herself a conflicted consultant, as opposed to anindependent reviewer of Mitchell’s claim. That Dr. Schmidt workedfor MET three days per week as a reviewer does suggest some degreeof a conflict of interest and the Court has appropriately weighedthat factor in tailoring its abuse of discretion review. (SeeDeposition of Dr. Schmidt 13:6-8; 14:13-18.).

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Mitchell might meet the requirement. Cf. Boyd v. Aetna,

438 F. Supp. 2d 1134, 1154 (C.D. Cal. 2006) (finding a

significant procedural irregularity when a plan

repeatedly informed claimant that there was “no objective

evidence” without ever specifying what evidence would

support a claim, albeit before Abatie).

15. Accordingly, the Court finds MET’s application of an

objective evidence requirement - written nowhere in its

policy, inconsistent with evaluation of conditions like

CFS, and without explanation of what evidence Mitchell

could have provided to satisfy the requirement - to

itself constitute an abuse of discretion.

16. Given the problems with requiring objective evidence in

this case, the Court finds that Dr. Schmidt’s report

failed to credit Plaintiff’s substantial evidence of

serious medical conditions. See Nord, 538 U.S. at 834.15

As discussed in the Findings of Fact, Mitchell’s

conditions were confirmed by the diagnoses of several

treating physicians. These physicians offered the

opinion that Mitchell was restricted in his ability to

work due to those conditions. Although Dr. Schmidt was

not bound to find a disability based on these opinions,

Dr. Schmidt was required to accord some weight to those


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opinions in reaching a decision. See id. at 834. Since

she reviewed Mitchell’s evidence under an unwritten and

unexplained objective evidence requirement for a

condition not amenable to objective verification, Dr.

Schmidt imposed an improper standard of review on

Mitchell’s evidence, and as a result, his claimed

disability.

17. This may explain why Dr. Schmidt’s report concentrates on

questioning much of Mitchell’s evidence. Dr. Schmidt

attributed a lack of objective evidence, in part, to the

lack of documentation of particular tests. Yet Dr.

Schmidt’s report admits the existence of many of those

tests in discussing the comments of treating physicians

on those very tests. (MET 73-79.) The administrative

record does not show that MET requested this available

documentation prior to rejection of Mitchell’s claim.

However, an ERISA plan “shall provide to every claimant

who is denied a claim for benefits written notice setting

forth in a manner calculated to be understood by the

claimant: . . . (3) A description of any additional

material or information necessary for the claimant to

perfect the claim and an explanation of why such material

or information is necessary. . . .” 29 C.F.R. §

2560.503-1(f); see also Booton, 110 F.3d at 1463. The

Ninth Circuit has made clear that an administrator cannot

base denial of a claim on a lack of information when it

fails to request available information from the employee.

See id. at 1464. However, MET never inquired into the


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16 The Court also notes that Dr. Schmidt concedes that she wasnot qualified to determine the disabling nature of at least some ofMitchell’s conditions. (MET 77-78) (stating “I am not qualified tocomment” with respect to Mitchell’s depression).

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availability of the records or the tests, that it

suggested would be useful evidence in its denial of

Mitchell’s claim.

18. Where MET had before it substantial, reliable evidence

indicating the existence of a disability, it could not

rely simply on a lack of evidence to deny Mitchell’s

claim. This is not a case where an administrator

credited other reliable evidence over a claimant’s

treating physicians. The circumstances suggest that MET,

a conflicted administrator, affirmatively sought to avoid

obtaining additional evidence that could support a claim,

perhaps in the interest of denying the claim for lack of

evidence. This was an occasion when an independent

medical examination was in order to determine the

credibility of Mitchell’s evidence.16 MET did not

exercise this option, choosing instead to assert a lack

of evidence without attempting to confirm for itself

whether Mitchell suffered from disabling conditions.

3. MET’s Determination That Mitchell Did Not Have a

Disability Was an Abuse of Discretion.

19. As a result of the serious problems with MET’s

adjudication of Mitchell’s administrative claim, MET

never determined whether Mitchell had a disability under

the master plan definition of disability. The master

plan definition required only that due to sickness


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Mitchell 1) was receiving appropriate treatment and 2)

was unable to earn 80% of his predisability earnings

during the elimination period and the next 24 months.

Mitchell provided substantial evidence that his medical

conditions impaired his capacity to work. Mitchell also

showed that he earned less than 80% of his predisability

earnings and that he was receiving regular treatment for

his conditions. MET did not otherwise dispute that

Mitchell was under “appropriate care” or that Mitchell

was unable to earn more than 80% of predisability

earnings. MET did not provide evidence that Mitchell’s

reduced earnings was due to a cause other than his

medical conditions. Accordingly, under MET’s master plan

definition of disability, the Court finds that Mitchell

had a disability. Therefore, the Court holds that MET

abused its discretion in denying Mitchell’s claim.

20. Nevertheless, the Court notes that MET’s denial of

benefits, based at least in part on the fact that

Mitchell was “still working,” is in tension with its

argument that Mitchell needed to be unable to perform

regular job functions. The fact that a person is “still

working” does not settle whether that person is able to

perform regular job functions. See, e.g., Hawkins v.

First Union Corp. Long-Term Disability Plan, 326 F.3d

914, 918 (7th Cir. 2003). Here, while Mitchell attended

work on a full-time basis, substantial evidence indicates

that he was unable to perform regular job functions.

That MET appears to have equated being at work with being


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able to perform regular job functions indicates its

flawed approach to evaluating Mitchell’s claim.

Mitchell’s physicians and supervisor attested to the

significant work impairment associated with his medical

conditions. MET’s reliance on Mitchell’s continued

attendance at work, as well as the noted problems with

the objective evidence requirement, do not satisfy the

Court that MET properly considered whether Mitchell was

able to perform regular job functions. Accordingly, even

under the more stringent policy definition of disability,

the Court holds that MET abused its discretion by denying

that Mitchell was disabled.

21. In this case, MET had to use the controlling master plan

definition of disability, but applied more stringent

requirements from a conflicting summary plan definition.

MET additionally applied an unwritten and unexplained

objective evidence requirement. As a result, MET failed

to credit Mitchell’s reliable evidence. Under the MET

policy, the Court finds that Mitchell had a disability.

Therefore, the Court holds that MET abused its discretion

in denying Mitchell’s disability claim.

E. MET Is The Responsible Administrator and Insurer

22. Having determined that MET abused its discretion in

denying Mitchell’s disability claim, the only remaining

question is whether MET is responsible as administrator

and insurer for Mitchell’s claim. This issue arises due

to the change in coverage from UNUM to MET on January 1,

2004. MET has argued for the first time in this


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17 The Court rejects MET’s argument that Mitchell’s disabilitywas a pre-existing condition for the same reason; Met never raisedthe argument in denial of Mitchell’s claim.

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litigation that Mitchell has no claim because he was not

covered by MET in October 2003, the claimed start date of

disability. During administrative review, MET never

offered this reason as a basis for denial of Mitchell’s

claim.

23. MET may not disavow that it was the administrator and

insurer for Mitchell’s claim when it never raised that

reason during administrative review.17 ERISA requires an

administrator to set forth the specific reasons for

denial of benefits. 29 U.S.C. 1133; 29 C.F.R. 2560.503-

1. When doing so, an administrator must support the

reasons for denial “with specific reference to the plan

provisions that form the basis for the denial.” Booton,

110 F.3d at 1463. The Ninth Circuit has explained that

district courts are limited to review of the reasons for

denial asserted during the administrative process to

prevent an administrator from sandbagging an employee “by

a rationale the plan administrator adduces only after the

suit has commenced.” Jebian v. Hewlett Packard Co.

Employee Benefits Org. Income Protection Plan, 349 F.3d

1098, 1104-05 (9th Cir. 2003).

24. The Court adheres to the principle that an

administrator’s decision may be upheld, if at all, based

upon the reasons provided during adjudication of the

administrative claim. To hold otherwise would eschew the


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18 The Court does not consider the fact that CBRE providedMitchell with an UNUM claim form, subsequent to filing hisdisability claim, to have any bearing on the specific reasons METoffered for denying Mitchell’s claim. Whether MET’s argument hasany basis is of no moment; MET never offered lack of coverage as areason for denial.

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ERISA policy that employee beneficiaries be candidly and

clearly informed of the reasons that disability benefits

are being denied, 29 U.S.C. 1133(1), and receive a “full

and fair review” of their claim, 29 U.S.C. 1133(2). MET

was certainly aware of the change in coverage and

Mitchell’s claimed beginning of disability.18 However,

during administrative review, MET never offered lack of

coverage as a reason for denying Mitchell benefits. The

Court, therefore, finds that MET has waived any argument

that it is not the responsible administrator and insurer

of Mitchell’s claim. Mitchell is entitled to LTD

benefits from MET.

CONCLUSION

For the foregoing reasons, the Court finds that MET abused

its discretion in administrative review of Mitchell’s claim. MET

abused its discretion in finding that Mitchell did not have a

disability under the master plan definition of disability.

Finally, the Court finds that MET waived its lack of coverage

defense by not raising that reason during administrative review.

Thus, the Court need not review Mitchell’s administrative claim

with UNUM.

The Court remands for purposes of a calculation of benefits in

accordance with this order. Mitchell is entitled to LTD benefits

under the MET policy for the 24-month period from October 2003 to


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19 The Court does not consider whether Mitchell is entitled toany benefits beyond 24 months. The parties did not direct anyarguments to the continuation of LTD benefits after 24 months,which is governed by different requirements than LTD benefits foran initial 24-month period. (See MET 20) (requiring after 24months that a person be “unable to earn more than 80% of your pre-disability earnings at your own occupation for any employer in yourlocal economy at any gainful occupation for which you arereasonably qualified taking into account your training, education,and experience”).

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September 2005, during which he was under regular medical care and

experienced the requisite loss of earnings due to sickness.19

IT IS SO ORDERED.

Dated: December 3, 2007 DEAN D. PREGERSON United States District Judge


Documents

Case 2:05-cv-00810-DDP-RNB Document ... - United States …court.cacd.uscourts.gov/CACD/RecentPubOp.nsf/ecc65f191f28f59b... · UNITED STATES DISTRICT COURT ... beneficiaries of an